Money blog: Bank of England warns millions of borrowers over mortgage rates (2024)

By James Sillars, business and economics reporter

Around half the UK's mortgage holders face paying higher rates over the next three years, the Bank of England has warned as its battle against inflation continues to drag on longer than hoped.

Its latest financial stability report - released twice a year - showed 4.4 million homes were set to refinance on to higher rates.

But it added that around a quarter of borrowers were expected to benefit from lower rates, based on current market pricing, as rates have dropped from the highs seen in 2023.

The central bank's financial policy committee also saw a risk ahead - without directly referring to Donald Trump's warning around raised US trade tariffs when he takes office - that higher trade barriers could hit global growth.

It said such barriers would feed uncertainty about inflation, potentially causing volatility in financial markets.

"A reduction in the degree of international policy cooperation could hinder progress by authorities in improving the resilience of the financial system and its ability to absorb future shocks," the report said.

When it came to the UK specifically, the Bank said that its latest stress tests of the UK banking system had raised no concerns.

The report was released against a backdrop of weak expectations for a third interest rate cut this year when the Bank's rate-setting committee meets in a few weeks' time.

Just 13% of financial market participants expect a reduction to 4.5% on 19 December.

That is because all the data the Bank's relies on, to judge whether a cut to borrowing costs is appropriate, contains red flags.

The headline measure of inflation is back above the monetary policy committee's 2% target at 2.3% following a sharp leap from 1.7% in October due to rising energy costs.

Some other stubborn elements include prices for services.

Another stumbling block has come from the pace of wage growth, which the Bank fears will stoke demand in the economy, and therefore price growth as a result.

There have been no dissenters on the future path for rates, if recent remarks by Bank rate-setters are anything to go by.

All have spoken of the need for a "gradual" approach.

That does not bode well for millions of new borrowers - and those whose loans are tied to Bank rate - though deals for things like fixed rate mortgages have eased in line with the two interest rate cuts announced by the Bank to date in 2024.

Separate figures released earlier in the morning by the Bank suggested confidence remained that borrowing costs were on a downward path, however, as mortgage approvals and lending rose in October.

The number of mortgages approved was at its highest level since August 2022, the data showed.

However, a slight drop in demand for consumer credit and higher savings rates also suggested continued caution over the slowing economic outlook.

It is further evidence of caution among households in the run-up to the budget, which, the government had warned, would be "tough".

Bank of England governor Andrew Bailey is holding a news conference on the findings from 11am - watch live in the stream at the top of this live page.

ByJames Sillars, business and economics reporter

Oil prices are on course to end the week 3% down.

Brent crude is trading at $72 a barrel, in a move that should help arrest recent upwards ticks in fuel pump costs.

The easing this week has mainly been driven by the Israel-Hezbollah ceasefire.

That has calmed fears of a wider Middle East conflict that could disrupt global supplies.

Underlining the lack of activity due to the US Thanksgiving holiday yesterday, with Black Friday also allowing for a long weekend across the Atlantic, the FTSE 100 is off to a flat start.

It is up by less than a point at 8,281.

A lack of data and corporate results means there is little direction.

Shares of Direct Line were a further 2% up, following a hike of 41% yesterday, on the back of its rejection of a takeover by its larger insurance rival Aviva.

That followed a report by the FT suggesting Aviva was in direct contact with major Direct Line investors.

It could signal a hostile approach ahead.

Nando's has announced plans to open over a dozen more restaurants this financial year after a boost in sales - despite some "uncertainty".

The chicken chain said "strong customer demand" has led to sales surpassing pre-pandemic levels.

Rob Papps, Nando's group chief executive, said that although the firm was working against an "uncertain" backdrop, it was pushing forward with investment - including the opening of 14 new restaurants.

Sites have already opened in Edinburgh, Newcastle, Doncaster, Taplow, Bognor, Watford, Northampton and Belfast.

The company opened 17 restaurants in the year to February 2024 - 11 in the UK and Ireland.

Mr Papps warned that "despite the improved sales performance", Nando's was facing "ongoing cost pressure" due to energy, labour and food price rises.

Every Friday, we take an overview of the mortgage market with industry insiders, and get the best rates from the team atMoneyfactscompare.co.uk.

A surprise selection of rate cuts from Barclays prompted some optimism for those with an interest in the mortgage market this week - but it lasted less than 24 hours.

The comedown arrived from Santander with rate hikes of up to 0.18 percentage points.

This was more in line with the general trend of previous weeks as high street lenders, which announced cuts through the early autumn in anticipation of multiple base rate reductions, began to reprice, after the budget.

The Bank of England appears keen to assess any inflationary impact of the budget - and has indicated further cuts to the central rate (it has made two in the last months) will be gradual.

The base rate sits at 4.75% - but average rates being offered on the high street are higher than this.

Here's how average rates are looking - though remember, those with more equity or deposits can find much better deals...

Away from rates, Halifax announced the launch of a new 1.5-year fixed-rate remortgage product that has been described as an "intriguing innovation".

Brokers largely welcomed the deal.

Ranald Mitchell, from Charwin Mortgages, said: "The launch of their 18-month fixed-rate mortgage offers a lifeline to those navigating today's uncertainty, providing the chance to lock in for a shorter period and reassess their options sooner."

However, Craig Fish, director at Lodestone Mortgages and Protection, said the deal "poses more questions than answers".

"What on earth are they expecting to happen mid-2026, to be offering a 1.5-year fixed rate? Maybe they know something that we don't," he said.

You can find the best rates for remortgage products here courtesy of Moneyfacts...

Moneyfacts also rounds up what it calls "best buys", which look beyond the lowest rates and takes in incentives and fees...

Millions of customers will be heading to shops and scouring the internet for bargains today with the arrival of Black Friday.

The day after Thanksgiving in the US has fast become one of the busiest shopping days of the year, and sees many retailers offering money-saving specials on a range of products.

But before you dive head first into the sales, have a read of our Black Friday coverage from this week - including whether deals are really as good as they seem, and major retailers who have been in the spotlight over questionable deals...

A travel publication has released a list of "no-go" holiday destinations where it says tourism is placing "unsustainable pressures on the land and local communities".

Chief among them, according to travel publication Fodor, is Bali in Indonesia, which welcomes millions of international visitors each year keen to take in the area's beautiful landscapes.

Formerly pristine parts of the island, like the Kuat and Seminyak beaches, are now covered in litter, with waste management systems struggling to keep up with the constant flow of visitors.

Also making Fodor's "no-go" list are European destinations including Barcelona, Majorca, the Canary Islands, Venice and Lisbon, as well as Mount Everest in Nepal and Koh Samui in Thailand.

A separate list detailing destinations that are beginning to suffer from the impact of tourism include spots such as Tokyo in Japan, Kerala in southern India and Oaxaca in Mexico.

Drivers are being handed more than 41,000 parking tickets a day on average by private companies, figures show.

Private parking businesses have been accused of using misleading and confusing signs, aggressive debt collection and unreasonable fees.

Some 3.8 million tickets were handed out between July and September, 14% more than the same period last year, according to government data analysed by the Press Association and the RAC Foundation.

The number of fines has more than doubled since 2018.

"It is hard to believe that tens of thousands of drivers are setting out each day intent on flouting parking rules on private land," said RAC Foundation director Steve Gooding.

He said drivers should be "very wary" of where they park to do their Christmas shopping.

"These numbers suggest that even the smallest indiscretion is likely to lead to a fine, which will erase any sense of festive cheer."

How do they get your name and address?

These details are given out by the DVLA when firms make a request over an alleged infringement.

Some 172 parking management businesses requested vehicle owner records in the three months to the end of September.

ParkingEye was the most active, buying 594,000 records.

The DVLA charges £2.50 per record.

What happened to new laws?

Mr Gooding called on the government to move forward with reforms after a bill was passed in 2019 to lay the ground for a code of conduct.

The code, which capped tickets at £50 and created a fairer appeals system, was withdrawn by the Conservative government in 2022 after a legal challenge by parking companies.

Isaac Occhipinti, head of external affairs at the British Parking Association, said it refuted "speculative scare stories perpetuated by the RAC Foundation".

"Private parking operators provide an essential service, ensuring motorists can park when and where they need."

He said the BPA published a code of practice in October that included caps on charges and recommendations from the withdrawn government code.

"Christmas shoppers will be protected from selfish parkers and be able to park conveniently and safely," he said.

A spokesperson for the Ministry of Housing, Communities and Local Government said it was "determined to drive up standards in the industry" and that more details on a code would be set out "as soon as possible".

The boss of Pets at Home says job losses can't be ruled out as the chain reviews the impact of increased costs after the budget.

Lyssa McGowan told the Retail Gazette the pet product retailer would "mitigate what we can" - but would have to "look at our overall cost structures" as it faces an additional £18m spend per year in increases to employer national insurance contributions and the national living wage.

"We've got no current plans for job losses... I don't think anybody can rule those out, but that's certainly not in our plans right now," she said.

The Bank of Mum and Dad is giving out more money for adults trying to get on the property ladder in the UK.

According a report by British thinktank Resolution Foundation, the rising cost of housing in the UK is driving more people to turn to their family for help.

It says the total value of financial gifts reached £29bn 2018-20, more than double the level in the UK a decade earlier.

Around 650,000 adults received a transfer of £10,000 or more in the two-year period.

"Those who aren't lucky enough to have wealthy parents often struggle to secure a home of their own," said Molly Broome, economist at the Resolution Foundation. "As Britain gets older and wealthier, transfers between generations are playing a greater role in shaping people's economic prospects."

People in their 30s - the average age of a first-time buyer in the UK is 34 - are most likely to receive financial gifts, the research shows.